Mortgages remain elusive for house hunters in New York and as a result, many buyers are working with more than one lender. Developers are also lining up additional lenders to help buyers obtain financing.
The developments come in response to the tough credit environment. Banks have tightened the availability of home loans to buyers and at the same time, many are reluctant to write mortgages for some new buildings where only a small percentage of apartments have been sold.
As attorneys for buyers are putting mortgage contingency clauses in contracts, attorneys for sellers are directing buyers to apply for financing at more than one bank or go to a mortgage broker, said Daniel Berman, an executive vice president with Bellmarc Realty, who has seen the scenario play out in a few recent deals.
“A year or two ago, buyers would apply to multiple institutions because they were shopping for an [interest] rate,” he said. “Today they’re applying to multiple lending institutions because everyone is leery about whether an institution will write the mortgage.”
Buyers incur additional costs, from $500 to $1,000 for a mortgage application fee and appraisal, and extra paper work when they go to multiple banks, he said. But in the long run, it could pay off for those who secure a lower interest rate on a 30-year mortgage.
In recent months, Jorden Tepper, executive director of sales for Century 21 New York Metro, has come across a few deals where buyers went to more than one lender to apply for a mortgage. Having more than one financing option helps deals get done, especially in a restrictive credit environment, he said.
“I’ve seen a buyer be proactive and have another lender ready and able to save the deal and not slow it down,” he said. “I’ve also seen one lender change their policies and not be able to close and the buyer had to start with a new lender. If a buyer is preapproved by more than one lender it’s only a positive thing and can speed up the transaction.”
Developer Daren Hornig teamed up with Topdot Mortgage, GuardHill Financial and First Republic Bank to assist buyers of condo units at the Prime, a 25,000-square-foot, 10-story building at 333 West 14th Street. Four of the building’s nine condos have been sold. Hornig said he devotes far more time than he used to working with banks to provide financing for buyers. “That’s almost my business now,” he said.
The developer of the 505, a new condominium at 505 West 47th Street in Hell’s Kitchen, recently brought in Bank of America as a second lender, along with Wells Fargo, to make mortgages available to qualified buyers. More than 90 percent of the project’s 108 condos are in contract.
“Every bank has its own set of problems,” said Ian Reisner of Parkview Developers, which is developing the 84,000-square-foot project in partnership with the Lev Group, under the name LEV Parkview Developers. “This is the first time I felt I had to bring in two strong lenders to increase the chances of the apartments closing.”